Investing in Financial History Newsletter
This is a free newsletter that explains current events by relating them to similar events in the past. On average, the newsletter is published every two weeks but varies based on the nature of current events. Please click the "subscribe" button below and provide your email address to receive this newsletter. A few recent issues are provided below.
The Dangerous Midpoint of the Inflationary Pendulum
Investing in Financial History – May 10, 2023
This issue revisits the rules of the "Inflation Game" exhibit at the Bank of England and explains why the U.S. is likely to experience a recession before the battle with inflation is won.
The U.S. is Playing a Dangerous Game of Debt Roulette
Investing in Financial History – May 2, 2023
This issue explains the danger of risking the creditworthiness of the United States, but it also warns about the unsustainability of the nation's spending practices. It uses the historical precedent set by Alexander Hamilton in 1790 to explain the importance of maintaining sound credit; then it uses the defaults of multiple states in the 1840s to explain the potential costs of losing it.
ChatGPT's Limited Knowledge of Financial History
Investing in Financial History – April 20, 2023
This issue revises the "Top Ten Investors in History," provided by ChatGPT. Although ChatGPT's performance was not horrible, it included four undeserving individuals and excluded four worthy ones. This included Hetty Green, who is the woman who I argue is the best investor in U.S. history.
Why Monetary Tightening is Both Necessary and Frightening
Investing in Financial History – April 12, 2023
Explains why the Federal Reserve must maintain a contractionary monetary policy until inflation is decisively contained. This will require economic pain, but it is essential for long-term economic prosperity.
A Fine Line Between Depression and Inflation
Investing in Financial History – March 22, 2023
The run on the Silicon Valley Bank revealed the delicate balance that the Federal Reserve must manage to prevent financial shocks from triggering a deep recession, while simultaneously maintaining a contractionary monetary policy to extinguish inflation.
Recent Research:
The articles and links provided include a selection of recent research papers, speeches, and podcasts that address a variety of topics, such as monetary policy, the debt ceiling debate, principles of central banking, cryptocurrency, and post-COVID-19 inflation.
Investment Principles:
The 10 Greatest US Investors and the Virtues that Made Them
CFA Enterprising Investor – March 31, 2023
This article was prompted by a question posed to ChatGPT by Andrew Mitchell of Ophir Asset Management. Andrew asked the app who were the best 10 investors in history. The article revises this list and explains the rationale for the changes. It also links each investor to 10 critical virtues shared by the best investors.
The Active Management Delusion: Respect the Wisdom of the Crowd
CFA Enterprising Investor – March 31, 2023
Explains the principle of the “wisdom of crowds” and why it makes active management of portfolios unlikely to outperform low-cost index funds. It also explains why the investment advisory profession promotes the use of excessive portfolio complexity and heavy use of active management despite the low probability of success.
The Story of Hetty Green: America’s First Value Investor and Financial Grandmaster
Financial History Magazine – Winter 2023
Explains the history of central banking in the United States beginning with the establishment of the First Bank of the United States by Alexander Hamilton in 1790. Explains how the U.S. gradually established the four key capabilities of a central bank, which include currency stability, bank regulation, lender-of-last resort powers, and monetary policy.
The Six Stages of Asset Bubbles: The Crypto Crash
CFA Enterprising Investor – December 21, 2022
Reviews the six stages that typically define the rise and fall of an asset bubble. It also reveals how the rise and fall of the bubble in cryptocurrency fits neatly in this model. Finally, it outlines four tips that may help investors to resist the temptation to partake in the next bubble.
The Debt Ceiling:
The Debt Ceiling: A Nation Divided and Indebted Cannot Stand
CFA Enterprising Investor – January 20, 2023
Discusses the extreme danger of risking the creditworthiness of the United States in a debt ceiling standoff, but also explains the unsustainability of U.S. federal budget deficits.
Central Banking:
A History of Central Banking in the United States
Financial History Magazine – Winter 2023
Explains the history of central banking in the United States beginning with the establishment of the First Bank of the United States by Alexander Hamilton in 1790. Explains how the U.S. gradually established the four key capabilities of a central bank, which include currency stability, bank regulation, lender-of-last resort powers, and monetary policy.
The Alchemist’s Paradox, Central Bank Sovereignty, and the Fate of Crypto
CFA Enterprising Investor – November 17, 2022
Explains the formidable hurdles that cryptocurrency and decentralized banking must clear to exit the murky world of shadow banking and enter the mainstream. Although history proves that it is unwise to ever say never, it seems highly unlikely that these hurdles will be cleared.
Covid-19 & Inflation:
Strong or Volcker? The Fed and Global Financial Stability
CFA Enterprising Investor – October 21, 2022
Explains the effects of the monetary policy in the United States using the historical examples of Paul Volcker (1979-1982) and Benjamin Strong (1925-1929) as examples. The article argues that the Federal Reserve’s policies are more likely resemble those of Volcker rather than Strong.
The Inflation Game: War, Peace, and the Perils of Central Banking
CFA Enterprising Investor – September 22, 2022
Explains why monetary policies enacted during periods of high inflation are likely to trigger a recession and brief period of deflation. The article argues that the monetary response of the Federal Reserve in 2022-2023 is highly likely to trigger a recession before price stability returns.
The Fed Isn’t Bluffing: The Real Threat of an Upside-Down Depression
CFA Enterprising Investor – June 22, 2022 (originally published on February 5, 2022)
Explains why the Federal Reserve cannot afford to allow inflation to persist and why they will continue tightening policy until price stability returns. It explains the causes of the Great Inflation of 1965-1982, and why the Federal Reserve leadership will not repeat them.
A Post-Covid Recovery is Unlikely to Resemble the Roaring 20s; the Years 1919 and 1999 Serve as More Insightful Comparisons
Social Sciences Research Network – May 2, 2021
Explains the similarities between the COVID-19 financial crisis and past crises, such as the onset of World War I in July 1914, the post-World War I/Great Influenza pandemic in 1919-1920, and the Dot-com bubble in 1999. The paper argues that speculation is likely to resemble the Dot-com era, while the burst of spending is likely to resemble 1919-1920.
Podcasts & Speeches:
Congresso Planejar 2022, São Paulo, Brazil – October 24, 2022
Featured speaker for the annual Planejar Congresso. The speech explained the similarities of the COVID-19 crisis and subsequent inflation to various historical events in U.S. history.
Why Hetty Green was the Best Investor in U.S. History
Banking on Girls Podcast – December 29, 2022
Interview with Marina Batliwalla to explain why Hetty Green qualifies as the best investor in U.S. history, and why most men mischaracterized her virtues as vices.